The Costa dream that turned sour

In the past two decades, thousands of Britons have moved to Spain in search of a place in the sun. But now property sales are plummeting, following the news that many of the expats' homes were built illegally, and demolition crews are moving in. Paul Hamilos reports

Rona Knowles knows what it means to fall foul of Spanish planning regulations. Knowles, 52, moved from Bedfordshire to the town of Catral, 44km from Alicante, in 2004 with her son Justin after her husband was killed in a motorbike accident. She used the life insurance payment to buy a plot of land from a British builder who was working with a local developer. Speaking little Spanish, she didn't realise that the deeds to the land were not what they seemed. Shortly after building began, Knowles received a letter from the regional authorities in Valencia, warning her that the house would be demolished as it was on a nature reserve. Having paid €20,000 (£15,000) for the land, and spent a further €65,000 on building work, she was devastated when her half-finished house was knocked down in 2006. But that's not the worst of it. "To add insult to injury, I could also be liable for the cost of the demolition of my house, which could be between €20,000 and €40,000," she says.

With no intention of moving back to the UK, Knowles invested in another property in nearby Dolores. This, too, has turned out to be illegal and faces potential demolition. When she moved into the house, she discovered that she had paid more than €50,000 more than her neighbours had for a similar property, with the estate agent - which has since closed down - pocketing the difference. "The worst thing is that I feel like I have let my husband down, not once but twice, by being conned. I've wasted the life insurance money," she says. "I came out here to retire, but I'm now working harder than I did at home."

Knowles, who works as a carer for an elderly disabled woman, and her son, face an uncertain future in the house they share with their six dogs. They have pinned their hopes on a nearby golf course development, which may see her land reclassified as urban land, thus saving it from the wrecker's ball. But so complex are the land regulations that their plans may yet come to nothing.

Knowles's nightmare is a stark illustration of what can happen to the expat dream of owning a property in Spain. The anything-goes boom of the past 20 years has come to a juddering halt as the Spanish authorities belatedly seek to combat illegal building, corruption and ecological destruction. In many cases, it is sun-seeking Brits who are paying the price of an orgy of construction that has seen 800,000 houses built annually for the past decade - more than in France, Germany and Italy combined. Now, as the political mood changes, it seems that many of these homes are built on legal quicksand.

Last month, Len and Helen Prior - a British couple who had retired to a small village in Almeria, southern Spain - hit the headlines as they watched their home being bulldozed. When Len Prior collapsed as his home came tumbling down, it seemed to sum up the hopes of retired Britons like him, who had gone to Spain in search of a new life. It sounded a warning, too, of the traps that lie in wait for unwary buyers.

Those warnings are now being heeded, and high-profile cases like that of the Priors have caused a huge fall in the number of sales of Spanish properties to foreigners: they are down by more than two-thirds, according to figures published last week by the Costa del Sol Association of Constructors and Promoters. But that doesn't help the million Britons now living in Spain, many of whom will be having sleepless nights wondering whether they are about to be caught up in the Spanish authorities' retrospective clampdown on illegally built properties.

Across Spain, so many cases of corruption in town halls over property development are being investigated that it is unlikely the defendants will ever find themselves in a courtroom. In perhaps the most notorious case, the entire town council of Marbella was dismissed last year, with 50 officials accused of corruption leading to the building of 30,000 illegal houses.

The problem of illegal development is particularly acute in the Alicante region of Valencia, which has the highest concentration of Britons anywhere outside the UK. In the small town of Catral alone, at least 1,300 illegal homes have been built on small parcels of "rustic land", even though regional laws state that only plots larger than 10,000sq m can be developed - and only then with the correct planning permission. A spokesman for Valencia's regional government says that 44 demolition orders against 109 houses are in place, and that more may follow. Valencia's so-called "land grab" laws also allow developers to appropriate land at the expense of individual home owners and then charge them for the infrastructure costs if the town hall deems it to be of "public benefit" or "social interest".

At a meeting of Catral expat residents, there is fear and confusion. As the winter sun blazes outside, a small gathering of disaffected Brits and one stoic Norwegian sit around discussing their plight. Many chain-smoke as their stories come tumbling out. Most have not yet been officially informed by the authorities that they live in illegal houses - they have learned through friends, or through the local English-language newspapers. But that uncertainty has only served to sow further doubt about their future. As a result, few are prepared to give their names, for fear of drawing attention to themselves.

Keith Campbell and his wife moved to Catral from Warwick when they retired in 2004. He explains how they contacted an estate agent, who showed them six plots of land, and introduced people who had already bought in the area. "There was no mention of illegal build - just 'Where do you want it and what style?' " he says. "Once it was built we got all the official paperwork, we saw a solicitor and were told it was all above board. It wasn't until 12 months after moving in that things blew up in our face. In November last year, we read about illegal houses in the papers and discovered that the mayor shouldn't have given permission to build. The house hasn't been demolished yet, and we haven't even been informed of our position. We have to live with the threat that the house will be knocked down, but we just don't know." He is keen to stress that he is not one of those Britons who "left their brains on the plane". "The sun didn't affect us - we thought we had done everything right," he says. "So we don't know how we ended up like this."

One of the reasons Britons have fallen foul of the Spanish property market is the clash of cultures regarding the law. There is no doubt that some bought houses knowing the sale was not above board. But most simply did not understand that signing on the dotted line would not bring them the carefree life they dreamed of. "Spanish bureaucracy is particularly difficult for British people to get their heads round," says Karen O'Reilly, an anthropologist from the University of Loughborough, who has been studying Britons in Spain for the past 15 years. "They don't understand that you can't go to a lawyer and be told what's going on, whereas Spaniards are much more used to that. It's very difficult for Brits to live with the uncertainty. They want to be able to abide by the laws, but they don't know how to and as a result often stick their heads in the sand."

The variety of ways in which people were duped into buying illegal houses would fill an entire series of Watchdog. One resident of Catral told how she was asked to pay part of the down payment on her house in cash, some of which would never see an accountant's ledger: "There we were, sitting outside the bank with tens of thousands of euros in cash in a bag. It was terrifying - all these kids were zooming past on their bikes. We thought we were going to be mugged." But she thought this was how things were done and didn't want to risk losing her house to someone else.

Others bought their Spanish houses in the UK, without ever setting foot in Spain. Stories are told of people who paid for what they thought were the deeds to a four-bedroom villa with a pool, only to discover later that they had paid for a wall or a warehouse. Yet more found that the land they had bought turned out to have had hundreds of thousands of euros' worth of debt signed over to it. Most failed to hire an independent solicitor, accepting the one offered by the property surveyors, thus breaking the first rule of any house purchase: buyer beware.

Part of the reason for this is the way British people envisage life in Spain, says O'Reilly. "They want this natural rural idyll, this idea of a past, romantic community that doesn't exist in Spain any more than it does in Britain." When they are later confronted with legal problems, they don't want to face up to them. "If they get involved in politics, or take part in the economy, start registering themselves or are forced to learn about dealing with all the bureaucracy, they lose that romantic idea of why they moved to Spain. In order to challenge the problems they have been presented with, they have to face up to the 21st century, and they don't want that."

This is evident from the way that Britons have attempted to overcome their legal problems. When it is suggested that those living in illegal houses in Catral should club together to organise court action, social divisions become apparent. One refuses to get involved because "some people are more illegal than us, so we don't want to all be lumped in together". O'Reilly argues that class plays a part in this. One of the key reasons many Britons move to Spain is that they no longer recognise the UK as the country they grew up in. But when they move to live in a British community in Spain, they find that the same problems exist: "There's a mixture of working-class families and retired middle management. They wanted to escape Britain and they find themselves in this British community that they don't particularly want to be part of, especially when they realise that they are not the kind of Brits they like."

The tale of Catral reads like a morality play, though it is unclear exactly what the moral is. The previous mayor, José Manuel Rodríguez Leal, is accused of allowing illegal development to go unchecked. Indeed, his brother-in-law worked as a developer on many of the houses that face demolition. Rodríguez is now facing criminal charges, though he seems unrepentant, blaming "political persecution". He told a radio station that what happened in Catral was no different from the rest of Spain. When asked why his brother-in-law was allowed to build so many illegal houses, he gave a showman's defence: "[He] came to me, asking why it was that so many other businessmen were building houses, and yet he was not allowed to because of our family relationship. I didn't have sufficient moral strength to tell him he could not." Rodríguez was defeated in the mayoral elections last year.

His replacement, Aurelio David Alvero, thinks that what has happened in the town is a disaster. At a meeting in his offices overlooking the church in Catral's main square, he says: "It pains me to see what has happened to the land that used to provide us with food."

But Alvero has a plan. His adviser on town planning has applied to the government in Valencia to reclassify the houses under the "land-grab" laws, which would regularise the illegal properties and allow for infrastructure to be built, and mains electricity and sewerage to be installed. Yet the mayor admits this might not be the ideal solution. Even if Valencia were to accept the plan, which it might not, it would be the property owners who would have to pay for the urbanisation, which could run to tens of thousands of euros per house. When it is suggested that this would effectively amount to an amnesty for illegal properties, legalising what were illegal acts, he can only shake his head: "What else can we do? How can we tell the difference between those people who bought in good faith and those who did not? There are human beings involved in this and we have to worry about them."

On the dusty main road between Catral and nearby Dolores, you can find a builders' merchants that wouldn't look out of place in any English town. Elaborate stone fountains and bird tables are piled high next to a group of garden gnomes. Row upon row of plaster Venuses de Milo stare forlornly into the distance. Covering a vast plot, the business stocks every imaginable fixture and fitting for expats who have chosen to make their home in Spain. The owner José, a gruff but friendly man, has seen his business grow from a small yard thanks to the building boom. But the hothouse atmosphere in which so many illegal houses were built has suddenly gone cold. And now that the Spanish authorities are investigating illegal developments, homeowners are loth to spend money on houses that might be knocked down. "When the construction industry slows down, it hits us too," says José.

After three decades of growth that made Spain one of Europe's strongest-growing economies, the wheels are starting to come loose. At the end of last year inflation reached its highest point in more than 10 years. Add falling house prices, a struggling stock market and rising unemployment and the future suddenly looks worrying for everyone, not just the British expats. There are wider social concerns, too. The construction boom might have been paid for by Europeans with money to spare, but it was built by cheap labour from across eastern Europe, north Africa and South America. Now that construction sites are closing, an estimated 500,000 construction workers will be laid off and are likely to struggle to find employment. They might be wise to look for work in the demolition business.